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Employment rose sharply in January as employers added a massive 353,000 jobs, highlighting a labor market that continues to struggle with high interest rates and strained household budgets.
The Labor Department announced Friday that the unemployment rate remained stable at 3.7%.
Economists surveyed by Bloomberg estimated that 185,000 jobs were added last month.
Job growth numbers for November and December were revised upward by a whopping 126,000, bringing the December tally from 216,000 to 333,000. This change suggests that the fall labor market will be stronger than previously thought.
Are wages keeping up with inflation?
Average hourly wages also rose significantly, rising 19 cents to $34.55, pushing the annual increase from an upwardly revised 4.3% to 4.5%. Since last spring, wage growth has continued to outpace inflation, which remains high, increasing consumer purchasing power.
Is the Fed expected to cut rates?
Blockbuster job and wage growth could make the Fed wary of cutting interest rates anytime soon. The Fed tentatively plans to cut interest rates three times this year, but announced this week that a March rate cut is unlikely as officials want to ensure that a pandemic-related inflation surge is contained in the long term.
“With a job rupture, a large upward revision, and low unemployment, dreams of an impending Fed rate cut are likely to be dashed by today’s report,” said Jason Schenker, president of Prestige Economics. said.
He doesn’t expect the Fed to start cutting rates until the third quarter.
But other economists still expect the central bank to take action in May. Federal Reserve Chairman Jerome Powell said this week that a strong economy and job market can coexist with easing inflation, and that officials will not be deterred from cutting interest rates as long as price increases continue to slow.
Wage increases affect inflation, so the increase in January’s wage increase raises concerns. But Nationwide economist Kathy Bojancic said the Fed will primarily focus on whether inflation reports in the coming months show continued slowing.
Which sectors are adding the most jobs?
Professional and business services led job growth by 74,000 jobs last month. In health care, he added 70,000 people. Retail, 45,000; Social Assistance, 30,000. 23,000 for manufacturing.
Federal, state and local governments added 36,000 jobs.
In recent months, industries less sensitive to rising interest rates and economic ups and downs, such as government, health care and social assistance, have accounted for much of recent U.S. job growth. This pattern continued to some extent last month, but the job gains were more widespread, with professional services and manufacturers hiring large numbers of workers.
How does the weather affect employment?
January’s totals were expected to be distorted by some unusual cross currents. Goldman Sachs said in a research note that cold, snowy weather in the Northeast and Midwest may have caused job losses in industries such as construction and restaurants. That appears to have worked, at least in part, with construction adding a modest 11,000 jobs and restaurants and bars cutting thousands of jobs.
Goldman said unseasonably warm weather helped boost hiring in December, and a further decline is expected as temperatures near normal last month set the stage for a rebound.
At the same time, retailers, hotels and trucking companies hired fewer holiday workers than usual late last year, resulting in fewer layoffs and a seasonally adjusted increase in hiring in January. That likely added about 100,000 employees, Goldman estimated, more than offsetting the damage caused by the weather.
What are the employment projections for 2024?
The bigger picture is that consumer spending and employment will decline this year as low- and middle-income households face high interest rates, record credit card debt, persistently high inflation, and reduced savings due to the coronavirus. This means that growth is likely to slow significantly.
Moody’s Analytics expects the U.S. to add an average of 72,000 jobs per month, up from 255,000 last year and 39 in 2022, as the post-pandemic surge in savings and spending fades further. There were 9,000 people.
Will there be layoffs in 2024?
Big tech companies like Amazon, Microsoft, and Google have recently announced thousands of layoffs, and some economists continue to predict a mild recession in 2024.
However, most forecasters believe the country will avoid recession. Gar Doyle, senior vice president at staffing firm ManpowerGroup’s technology recruiting arm, Experis, said the big tech companies that are cutting jobs in the gaming and streaming industries are also hiring for artificial intelligence and machine learning. He says it is being strengthened.
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